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Bridging Finance

What is Bridging Finance?

-         it’s short-term funding – usually for periods of 1 day to one year (and possibly longer)

-         it’s always secured against property

-         it’s available at short notice – funding can be in place within 3 days

-         bad credit history is not a problem

-         the interest can be added to the facility, meaning that you don’t need to worry about servicing the loan – known as interest roll-up

-         it can be a first, second or third charge loan

 

Uses of Bridging

-         when you can’t get funding from your own bank, or any other high street lender

-         development funding

-         major refurbishment of property

-         auction purchase

-         paying a tax bill

-         purchasing property under value

-         when you need to complete the purchase of a new property before completing the sale of another property

-         when you need to complete the purchase of a commercial property and the leases are not fully in place

-         business turnarounds – where the business being acquired is not being managed properly

-         as a revolving credit facility

-         where you have excellent rates with your existing lender, but your lender will not allow you to increase your existing loan on a short-term basis, without changing your overall terms

-         raising money against your main residence for business purposes

-         being threatened with repossession by your current lender, so replacing with a bridge loan will buy you time to sell an asset

 

Typical Costs and Charges

 

First Charge Loans

-         against one property – up to 70% (can go up to 80% on super prime)

-         if additional security is offered then 100% plus funding is available

 -         Rates:

 

                         < 50%     0.45%pm

                         < 60%     0.60%pm               } Can be added to the loan (known as interest roll-up)

                        < 75%      0.69%pm    

 

-         Fees:

          - Arrangement fee 1-2%  (can be added to the loan)
          - Exit fee 0-1%
          - Lender’s legal costs
          - Own legal costs
          - Valuation fees - £1-2 per thousand pounds of value

Lenders value in one of two ways:

i) Open Market Value (OMV)

ii)180 day value

 

Second Charge Loans

-         up to 65% -  can go up to 70% for strong cases (including existing loan)

-         Rates:

                          < 50%     0.70%pm

                          < 65%     0.90%pm                } Can be added to the loan (known as interest roll-up)

-         Fees:

          - Arrangement fee 1.5-2.5%  (can be added to the loan)
          - Exit fee 0 -1%
          - Lender’s legal costs
          - Own legal costs
          - Valuation fees - £1-2 per thousand pounds of value

Lenders value in one of two ways:

iii) Open Market Value (OMV)

iv) 180 days valuation

 

NB

All second charge loans need the consent of the existing first charge lender.

 

Institute of Financial PlanningNACFBPFS

 

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Bond Finance Limited Registered Address: 2nd floor 11 Philpot Lane, London, EC3M 8AA. Registered in England & Wales, No. 05050021.

Bond Wealth Management Limited is authorised and regulated by the Financial Conduct Authority. Financial Services Register No: 05050019 http://www.fca.org.uk/register.

Bond Wealth Management Limited Registered Address: 2nd floor 11 Philpot Lane, London, EC3M 8AA. Registered in England & Wales, No. 05050019.

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